Short Squeezes
Global equity markets closed the week at record highs, led by solid earnings in tech—particularly Alphabet and other AI-centric firms—fueling a broad risk-on sentiment.
Over the next two weeks, results from the largest tech names—Apple, Microsoft, Meta, and Amazon—will set the tone for the rest of the summer. With valuations stretched and expectations sky-high, this earnings cycle has the potential to either fuel the rally further or trigger the first real pullback investors have seen in months.
QBTS has risen even higher since we initiated our short position, defying weak fundamentals and riding a wave of speculative buying. The rally has been fueled by a mix of retail hype, specifically Jim Cramer’s comments have caused the stock to retest all time highs, and the market’s broader appetite for anything tied to AI or quantum computing, no matter how premature the business case is.
While the recent run looks strong on the surface, the core story hasn’t changed: revenue is minimal, cash burn is heavy, and commercial adoption remains far off. These rallies tend to exhaust themselves quickly when they’re not backed by real progress. For now, we’re letting the stock stretch, staying patient, and preparing to scale in heavier at levels where the risk/reward tilts even harder in our favor.
Profiting from Short Squeezes
Short squeezes happen when too many traders are betting against a stock, and a sudden surge in buying forces them to cover, sending prices even higher. It’s pure mechanics—shorts panic, buy back shares, and create a feedback loop that rockets the stock. Recently, we’ve seen this play out in Kohl’s, where relentless retail buying and option flow ripped the stock up nearly 40% in a single day. Krispy Kreme pulled the same move—blowing out shorts and spiking aggressively with no fundamental reason, just sentiment and positioning gone wrong for bears.
The way to profit is to hit the reversal as soon as the squeeze runs out of buyers at the top. These moves are purely mechanical—once shorts have covered, there’s nothing holding the price up. You fade the spike immediately after the parabolic blow‑up, size aggressively while liquidity is still there, and ride the collapse back to reality. The best trades come from attacking the overextension while everyone else is still celebrating the rally.
Disclaimer: We are short shares of QBTS as of writing this. The content in this newsletter is for informational and educational purposes only and should not be considered financial, investment, or legal advice. A4K Capital and its affiliates are not responsible for any financial losses or decisions made based on the information provided.
